When Clients Are Forced to Retire Early

No matter the circumstances, here’s how advisors can help them adjust financially and emotionally to their unplanned reality.

By Linda Hildebrand 

An early-onset dementia diagnosis crushed financial advisor Jennifer Schoonmaker-Dasch’s client. It short-circuited his career expectations and the family’s retirement investment projections, too.

Knowing the client would have a smaller physical world going forward, the family opted to sell its vacation condo at the beach, says Schoonmaker-Dasch, an Edward Jones advisor in Lexington, N.C.

It’s the kind of tough decision about 40% of clients have to make when circumstances force them to retire early, according to an Edward Jones sampling of 200 advisors nationwide.

Other clients in their late 50s and early 60s who Schoonmaker-Dasch led through such surprises in the past year include one who received severance in a company downsize, one diagnosed with a terminal illness and a homemaker whose husband died suddenly before they were 59½, she says.

“All are examples of how life throws curve balls,” Schoonmaker-Dasch says. “They had to adjust their retirement plan.”

The first things she looked at with them were work and medical insurance options.

“We think about what levers can be pulled. Maybe someone wants to work but wants a less stressful job with health insurance. Or maybe someone wants to work, but not full-time, for a paycheck to pay for health insurance,” Schoonmaker-Dasch says.

“Or, maybe they cut back on lifestyle,” she says. For example, some may change the dream of touring Europe to vacations in Charleston and Atlanta.

‘When they come out the other side, I think a lot of times, these things do leave disappointments,” Schoonmaker-Dasch says.

“But I think good things happen that are unexpected because of forced early retirement,” she adds.

Planning for surprises

Her client whose office administration job was eliminated through downsizing took a part-time job in the local school cafeteria for its health insurance benefits, Schoonmaker-Dasch says.

Even though she had no food service experience, the lunch-lady job was closer to home. She could get her grandchildren off the bus every day.

“She baked cookies,” Schoonmaker-Dasch says, and had to make adjustments along the way.” “Is she crazy about working in a school cafeteria? It’s not what she pictured she would be doing.”

But she has summers and school holidays off with her grandchildren, which helps her family save child-care costs, too.

“It works for her,” says Schoonmaker-Dasch.

Still, there’s the heartbreak of losing career identity, no matter how a forced retirement happens.

“The common emotions … are a surprise that comes out of left field,” Schoonmaker-Dasch says.

Clients who know layoffs are coming have some chance to prepare, at least.

For a couple of years, her client had delayed purchases and cut back on lifestyle, she says. And, the client accumulated more cash-on-hand in anticipation of losing her career job, Schoonmaker-Dasch says.

So, even before the layoff, Schoonmaker-Dasch and the client were making a holistic evaluation – “that intersection of finances with health and family and what they want to do.”

“It’s not just one quick fix that’s the same for everybody,” she says.

The brass tacks

The first budget item Schoonmaker-Dasch takes up with clients is paying off debt as soon as feasible, she says. They’ll need the interest they save over the long-term.

That’s true anytime, she says, but especially when a client foresees layoffs.

The first assets to tap in a portfolio are going to be different for each client, she says. There are tax implications when money is moved and penalties from early withdrawals.

“That age 60 is a real balancing act. That’s where the personal conversation matters,” Schoonmaker-Dasch says. “I’ve worked with my clients a long time and have developed deep relationships.”

Forced retirement sometimes forces some tough choices, she says.

“Do you want to keep the beach condo, or do you not want to go back to work?” Schoonmaker-Dasch says she may ask.

Her company, Edward Jones, encourages all clients to diversify assets from the get-go, she says. “That’s part of the comprehensive perspective,” Schoonmaker-Dasch says. “You need different ‘buckets’ that can be accessed at different times.”

The survey that Edward Jones hire Morning Consult to conduct in May also found the 200 financial advisors nationwide recommend that clients:

  • Obtain supplemental health insurance (52%).
  • Secure long-term care insurance (48%).
  • Adopt a more frugal lifestyle (48%).
  • Develop an income withdrawal strategy (35%).
  • Determine the optimal timing for claiming Social Security benefits (35%).

Client priorities were almost unanimous: Staying mentally active (99%), earning health insurance benefits (99%) and feeling a sense of purpose (97%) are the most important benefits of working in retirement, according to the financial advisors surveyed.

The most common counsel the advisors offer clients regarding work in retirement is to embrace an open-minded approach (36%), followed closely by networking for new opportunities (31%).

“I think if you want to say what’s key to successful retirement, it’s remaining flexible and adaptable,” Schoonmaker-Dasch says

. “A lot of good things can happen: reduce stress, time with family … but it depends on those intersecting priorities.”

Linda Hildebrand is a longtime newspaper editor and consumer reporter.

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